Equity market and credit concerns keep core government bonds bid, especially JGBs and USTs

Asia Market Update: Equity market and credit concerns keep core government bonds bid, especially JGBs and USTs; Hynix withdrew unit’s US IPO plan; WTI remains in the $100 area as Middle East uncertainty lingers ahead of another weekend; Moody’s on France?

General trends and developments

-US capital markets appear to be unfriendly towards South Korean companies. Hence, Hynix confirmed that it will cancel the planned US IPO of its Solidigm unit, according to a statement released by the co. earlier on Friday.

-Global AI capital race continues: OpenAI is reportedly near a funding round of up to $30B at a $1.25T valuation, according to CNBC. Unsurprisingly, China’s DeepSeek had already disclosed an upsized $15B fundraising earlier on Thurs.

-Building a data center appears to be easier in Queensland than Melbourne: Australian co. X2M signed an agreement for a 10Mw ‘AI-enabled’ data center. X2M is targeting data center facilities in low-density population regions of Queensland and the Northern Territory, rather than large metropolitan campuses, placing less demand on the grid and requiring a smaller capital commitment. Recall on Wed, big Aussie data center NEXTDC saw both its equity and bond prices collapse after it disclosed a profit warning due to a delay regarding its Melbourne data. The revision primarily reflected delays to electricity network works by Jemena Electricity Networks. Jemena attributed the suspension to community and stakeholder opposition to the works and to the absence of local council consent pending further consultation.

-Japan’s CPI was above the BOJ target for the 1st time in 9 months as foreshadowed by the previously released Tokyo data: Japan’s September National CPI came in line with expectations at +2.1% y/y (vs. 2.1% expected), moving above the highly anticipated BoJ’s +2.0% CPI inflation target for the first time in nine months. Meanwhile, core inflation ex-fresh food & energy increased higher than expected at +2.4% (vs. 2.3% expected), suggesting underlying price pressures remain persistent.

-Despite the hotter inflation data, the focus of bond markets remains elsewhere, primarily on safe-haven demand and credit concerns. [including AI and France]. As such, Japan OIS is currently pricing in an only 5.5% chance of a +25bp hike at the October meeting and an 84.0% probability of a hike by December (vs. 5% and 81% on Monday respectively), with the next BoJ rate decision scheduled for October 29-30th, 2026.
-Interestingly, the French Euro OAT Futures (FOATZ26) futures contract closed at $107.19, with the day’s trading range between $107.01-10731, while the French-German 10-year government bond yield spread widened, nearing 175bps. Against this backdrop, French bond markets remain under pressure amid the country’s substantial fiscal deficit, ongoing political instability, recent riots and uncertainty over the passage of the 2027 budget, with the government planning to issue €340 billion in medium- and long-term debt next year. Moody’s Rating is scheduled for after the European close on Friday 23rd October.

-APAC Oct Prelim PMI revealed mixed Japanese data with the highlights being Australia’s services collapse and continued manufacturing contraction in the face of energy-price driven inflation: For Australia, average input costs increased at the fastest rate since May with manufacturers facing a higher level of cost inflation compared with their services counterparts, according to the analysts. Australia’s PMI data, also, showed the latest hike in manufacturing costs was mainly reflective of supply pressures with lead times further worsening for goods producers while their purchasing activity continued to fall in line with lower new orders. Both manufacturing and services companies cited factors including energy, shipping, commodity and wage costs as the drivers of higher OpEx.

-After Thursday’s aggressive rate hike, BSP Gov ‘can’t say if 50 or 25 or bigger’ going forward: The Philippine central bank (BSP) delivered a more-than-expected +50bp rate hike to 5.50%, marking its fourth consecutive hike and bringing total tightening in the current cycle to +125bps. The BSP cited persistent inflation pressures as the 2027 risk adjusted inflation forecast was raised to 6.0% (vs. 5.4% prior), with prior September CPI rising +7.2% y/y (vs. +6.8% prior), remaining above the BSP’s 2–4% target range since March 2026. Additionally, BSP raised its Standing Overnight Deposit Rate by 50bps to 5.00%, citing concerns over the PHP, which hit a record low of 63.167/USD on 10/20/2026.

-Do Chinese biotech's really need US markets for capital? The US Treasury Dept has proposed adding biotech to outbound investment restrictions list; The U.S. Department of the Treasury (Treasury) today issued a Notice of Proposed Rulemaking (NPRM) to propose updates to the Outbound Investment Security Program (OISP) based on direction from Congress in the Comprehensive Outbound Investment Security (COINS) Act, passed as part of the Fiscal Year 2026 National Defense Authorization Act. The COINS Act codifies the U.S. Government’s approach to regulating certain outbound investments by U.S. persons and builds upon Treasury’s existing OISP; The COINS Act also authorizes the Secretary—in consultation with the appropriate congressional committees and subject to notice and comment rulemaking—to add and define technologies beyond those specifically listed in the law that enable the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern. Accordingly, the Secretary has added biotechnology to the proposed regulations. [**Reminder Sept 18th: (US) Reportedly US is working on rules for pharmaceutical companies investing in China that would likely preserve their ability to strike most licensing deals for Chinese drugs - press].

-Shares in Australian BNPL firm Zip Co. plummeted by 50% amid fraud event in the US.

-Swiss materials company Sika noted its strong Americas performance was offset by Asia. The co’s Americas data center growth continued at a double-digit pace.

-US equity FUTs -0.1% to flat during Asia trading.

Looking ahead (Asian-weighted focus, using EST/EDT time-zone)

-Sun Oct 18th: NZ Sept Trade Balance, (Sun night, CN Q3 GDP, CN Sept Industrial Production & Retail Sales & Unemployment Rate, CN NBS Press Conference).

-Mon Oct 19th: CN Sept FDI, CA Sept CPI & Core CPI, (Mon night, CN PBoC 1-Year & 5-Year Loan Prime Rate Settings, DE Sept PPI).

-Tue Oct 20th: US Sept Prelim Building Permits & Pending Home Sales, KR Sept PPI, (JP Sept Trade Balance, UK CPI & Core CPI, ID BI Interest Rate Decision).

-Wed Oct 21st: IN RBI Oct 5-7th Meeting Minutes, RU Sept PPI, US 20-Year Bond Auction, NZ Q3 CPI, (Wed night, KR BoK Interest Rate Decision, PH BSP Interest Rate Decision, HK Sept CPI, HK Sept Unemployment Rate).

-Thu Oct 22nd: EU Oct Preliminary Consumer Confidence, (Thu night, AU/JP/IN Oct Preliminary S&P/HCOB Mnfg/Svcs PMI, JP Sept National CPI & Core CPI, ID Sept M2 Money Supply, SG Sept CPI & Core CPI, TW Sept Industrial Production & Unemployment Rate, TW M2 & M3 Money Supply, EU Sept Car Registrations).

-Fri Oct 23rd: EU Preliminary Oct HCOB Mnfg/Svcs/Composite PMI, RU CBR Interest Rate Decision, US Preliminary Oct S&P Mnfg/Svcs/Composite PMI.

Holidays in Asia this week

-Mon Oct 19th: Hong Kong.

-Tue Oct 20th: India.

-Fri Oct 23rd: Thailand.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 Index opens -0.4% at 8,760.

-(AU) AUSTRALIA OCT PRELIMINARY MANUFACTURING PMI: 49.7 V 49.6 PRIOR (2nd month of contraction).

-(AU) Australia Government: New sanctions targeting North Korea cybercrime.

-(AU) Australia proposes to raise cap on ADI banks' covered bond issuance (currently 8% of its resident assets).

-(AU) X2M: Signs Agreement for 10MW AI-Enabled Data Centre - update.

-(AU) Australia sells A$1.0B v A$1.0B indicated in 1.00% Nov 2031 bonds; Avg Yield: 4.8708% v 4.9936% prior; bid-to-cover: 4.32x v 4.47x prior.

-(NZ) ANZ: Now sees RBNZ raising cash rate at next three meetings; notes the Q3 core inflation data.

-(NZ) New Zealand Chief of Defense Force Tony Davies resigns due to 'errors of judgement made in the past'.

China/Hong Kong

-(CN) Shanghai Composite Index opens -1.0% at 3,623; (HK) Hang Seng Index opens +0.4% at 23,02821.

-(CN) China President Xi orders all-out rescue efforts following Tibet earthquake - Xinhua.

-(CN) China Securities Regulator (CSRC) reportedly said to consider issuing new spinoff guidelines next year [2027] and to scrutinize spinoff applications more carefully - US financial press.

-(CN) Shanghai Securities News 'urges calm' and called for a 'rational' view regarding AI token usage amid the AI Video vs Coding Debate - US financial press.

-(CN) China expands L3 autonomous-driving trials - China Economic Daily [update].

-(CN) China Daily opinion piece: Falling exports to China to 'take toll' on jobs and businesses in the US.

-(CN) China Finance Ministry (MOF) auctions 30-year bonds; Avg Yield: 2.06% v 2.1464% prior.

-(CN) China Finance Ministry (MOF) sells CNY15.5B in additional 2028, additional 2029, additional 2031 and additional 2036 bonds in Hong Kong - Statement.

-(CN) China PBOC sets the yuan mid-point at 6.7180 v 6.7195 prior (strongest level since February 2nd, 2023).

-(CN) China PBOC Open Market Operation (OMO): Sells CNY258B in 1-day Overnight Reverse Repo & 7-day Reverse Repos; Net injects CNY25B v injects CNY48B prior.

-(HK) Hong Kong has introduced a new batch of 18 strategic enterprises [including Johnson & Johnson] to either expand or establish operations in the city, the addition will bring the total number of strategic firms to 142; 50% of these cos. were from Mainland China.

Japan

-(JP) Nikkei 225 Index opens -0.4% at 62,614.

-(JP) JAPAN SEPT NATIONAL CPI Y/Y: 2.1% V 2.1%E; CPI (EX-FRESH FOOD) Y/Y: 2.1% V 2.1%E.

-(JP) JAPAN OCT PRELIMINARY MANUFACTURING PMI: 53.3 V 54.1 PRIOR (10th month of expansion).

-(JP) Japanese yen hits 3-week low to 156.53, -0.15%.

-(JP) Japan benchmark 10-year JGB futures rise +0.6pts in early trade.

-(JP) Japan Econ Min Kiuchi: Does not think conditions met for the government to officially declare the end to deflation; Will publish policy council documents in English - Tokyo, Japan.

-(JP) Japan government is considering scaling back gasoline subsidies from as early as December, 2026 - Officials.

-(JP) Japan Fin Min Katayama: Financial institutions responded smoothly to PHP issue - Tokyo, Japan.

-(JP) Japan Trade Min Akazawa: Plans to launch a team of white hat hackers; the team will be launched in Nov within the Innovation Platform Agency - Tokyo, Japan.

-(JP) Japan sells ¥3.3T vs. ¥3.3T indicated in 3-Month Bills; Avg Yield: 1.2680% v 1.2803% prior; bid-to-cover: 3.84x v 4.30x prior.

Korea

-(KR) Kospi Index opens -2.4% at 5,403.

-(KR) 00660.KR Statement: [Confirms] Decides not to pursue US IPO of Solidigm.

-(KR) 005930.KR To boost India phone exports under new incentive scheme; considering shift in some production from Vietnam to India - ET [India press].

-(KR) 660.KR SK data center unit SK Hyper co. is in talks to fund a $350B AI buildout [timeframe uncertain]- US financial press.

Other Asia

-(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 50BPS TO 5.50%; MORE-THAN-EXPECTED [Philippines Central Bank has now raised the Overnight Borrowing Rate four times under the current tightening cycle by a total of 125bps (from 75bps)] [US market close].

-(PH) Philippine Central Bank (BSP) Gov Remolona: Policy is restrictive but not sure if restrictive enough; Off cycle move was discussed - post rate decision press conference [US market close].

-(ID) Indonesia Sept M2 Money Supply Y/Y: 8.3% v 8.2% prior.

-(ID) Indonesia Rupiah weakens to 18,075/USD, lowest level since late-July.

-(ID) Indonesia Central Bank (BI) to continue lowering SRBI yields, outstanding.

-(TW) Taiwan said to add 343 entities into its export control list for entities in China and Russia.

-(TW) Taiwan suspends stock trading on Oct 23rd due to typhoon - press.

-(SG) Singapore Q3 Final URA Private Home Prices: 1.4% v 1.4% prelim.

-(VN) Vietnam President Lam to visit Japan between November 8-11th.

North America

-(US) SEPT LEADING INDEX: +0.0% V -0.1%E [US market close].

-(US) INITIAL JOBLESS CLAIMS: 194K V 200KE; CONTINUING CLAIMS: 1.73M V 1.71ME [US market close].

-(US) BOFA INSTITUTE: WEEK-TO-OCT 17TH TOTAL CARD SPENDING +4.9% Y/Y V +5.1% PRIOR WEEK; Lower-income spending growth has consistently outpaced higher-income spending growth over the past several weeks. [US market close].

-(US) WEEKLY EIA NATURAL GAS INVENTORIES: +77 BCF VS. +78 BCF TO +80 BCF INDICATED RANGE [US market close].

-(US) REPORTEDLY SOME MAJOR US BANKS DETECT UNAUTHORIZED AI AGENTS IN ACCOUNTS - AXIOS [US market close].

-(US) Oct Kansas City Fed Manufacturing Activity: 11 v 12e [US market close].

-(US) HHS Sec RFK Jr's peptide plan will reportedly force compounders to report side effects -press [US market close].

-(US) US Treasury Dept: Proposes adding biotech to outbound investment restrictions list.

-(US) President Trump: Will release $150M to increase US refining capacity. Using Defense Production Act (DPA) to produce more diesel, gas - The President holds a political rally in Sioux City [Pre-Credentialed Media], Sioux Gateway Airport, Sioux City, IA.

-(US) Pres Trump sends memo to Sec Def Hegseth invoking Defense Production Act to expand petroleum capacity; Trump waives DPA Section 303 rules to expand oil capacity, saying its vital to the national defense - press.

-(US) US Justice Department asks Appeals Court to intervene in dispute over 20,000 California mail-in ballots - Court Filing.

-(US) US State Department: US welcomes conclusion of third round of political reconciliation talks between Venezuela's 2015 national assembly & interim government. Continue to urge for immediate release of all political prisoners in Venezuela.

-(US) US State Department Spokesperson: There is no US-Turkey proposal concerning Lebanon. No US-backed proposals to change Lebanon politics structure - post on X.

-(US) Flexport Global Logistics Update: "Return to Suez routing is shortening transit times on a growing share of Asia-Europe services", Ocean TPEB spot rates held flat, Air North/South China rates and demand rising towards US and Europe.

-(US) White House releases US President Trump's Schedule: President Trump to deliver remarks in Florida on Friday. President Trump to deliver remarks in Georgia on Saturday.

-(US) Mark Walter [owner of TWG Global] wins partial approval to lower level of 'scrutinized' loans - US financial press.

-(US) WDC Reports Q1 $4.64 v $4.09e, Rev $4.38B v $4.16Be; Guides Q2 strong; Raises quarterly dividend 16.7% to $0.175 from $0.15 (indicated yield 0.18%) [US market close].

-(US) SPCX Launches SpaceX super intelligence partner network with Grok platform; Bain, Nvidia, and Snowflake are noted launch partners [US market close].

-(US) BBDB.DE President Trump: Bombardier investing $270M in Texas, Kansas, Indiana - post on Truth Social.

-(US) PONY Statement: Signed MOU with Nvidia, inDrive on autonomous ride-hailing. The companies will evaluate feasibility of level-4 ready autonomous vehicles in Kazahkstan, their first test market.

-(US) CIPLA.IN FDA conducts inspection at Invagen facility in New York from October 19-22nd, 2026.

-(CA) Canada Oct CFIB Business Barometer: 50.0 v 48.5 prior [US market close].

-(BR) Flavio Bolsonaro at 50% vs. Incumbent President Lula at 50%; Runoff election is Oct 25th - Brazil press.

-(AR) Argentina Energy Secretary Daniel Gonzalez steps down; addresses departure on podcast.

-(CO) Colombia Government issues 2027 budget by decree - US financial press.

Europe

-(EU) EURO ZONE OCT ADVANCE CONSUMER CONFIDENCE: -17.9 V -17.0E [EU market close].

-(FR) FRENCH-GERMAN 10-YEAR SPREAD TESTS 175BPS [EU market close].

-(TR) TURKEY CENTRAL BANK (CBRT) CUTS ONE-WEEK REPO RATE BY 100BPS TO 36.00%; AS EXPECTED [EU market close].

-(UK) OCT CBI INDUSTRIAL TRENDS TOTAL ORDERS: -32 V -20E [EU market close].

-(UK) Oct GfK Consumer Confidence: -24 v -14e (lowest level since September 2024).

-(DE) Germany Fin Min Klingbeil: Will not gain any new fiscal room for maneuvering in 2027; Projects FY federal tax rev to be €3B below May forecast [EU market close].

-(UR) Ukraine seeks to move customs checks inside EU to avoid Russian drones - FT.

-(UR) Ukraine's energy company Dtek says Russian attack hit one of its power stations.

-(IT) Italy said to pass emergency aid for transport sector - press [EU market close].

-(FR) KER.FR Q3 Rev €3.35B v €3.34Be v €3.33B y/y; Affirms outlook [EU market close].

-(FR) DG.FR Q3 Rev €20.4B v €20Be; Affirms outlook [EU market close].

-(FR) OR.FR Q3 Rev €11.6B v €12.5Be [EU market close].

Middle East

-(AE) UAE Environment Ministry: Tanker oil spill affects beaches in Umm Al Quwain. Temporarily closes All Umm Al Quwain beaches and coastal areas after oil spill.

-(SA) Saudi Arabia postpones UN global data forum and second Saudi statistical forum to 2027.

-(SA) Saudi-led Coalition: Intercepted and destroyed two drones towards Southern region - Press.

-(SA) Saudi Civil Defense: Saudi Arabia issues early warning alert in Najran region.

-(SA) Saudi Civil Defense: Saudi Arabia issues early warning alert in Riyadh.

-(SA) ARAMCO.SA Said to have instructed staff to evacuate its headquarters in Dhahran and work remotely - press [EU market close].

-(LB) US State Department Spokesperson: Disturbed by developments at Central Bank of Libya. Will continue to help Libya address its economic challenges - post on X.

Levels as of 01:20 ET

Nikkei 225 -0.7%; ASX 200 flat; Hang Seng +0.7%; Shanghai Composite -0.3%; Kospi -0.9%.

Equity S&P500 Futures -0.1%; Nasdaq100 flat; DAX -0.2%; FTSE100 flat.

EUR 1.1227-1.1208; JPY 157.12-156.08; AUD 0.7024-0.7005; NZD 0.5699-0.5679.

Gold -0.3% at $4,012/oz; BTC -1.4% at $81,672; WTI Crude Oil +1.0% at $100.42/bbl; Copper +0.6% at $6.4392/lbs.